Despite having significantly reduced British American Tobacco’s (BAT’s) share of its asset base over the last decade, Johann Rupert-controlled Reinet said the cigarette maker continued to be a fortress, giving it liquidity to pursue other opportunities.
In its annual report made public on Tuesday, Reinet said it had received €122m in dividends from BAT in the year ended March.
That offset a €177m decline in the value of Reinet’s investment in BAT, following a decline in the share price on the London Stock Exchange in the period under review.
BAT’s stock in London decreased from £31.94 a share at the end March 2022 to £28.41 at the end of the current financial year.
The decline in the share price means the 48.3-million shares Reinet holds in BAT were worth €1.56bn at the end of March, from €1.82bn in the previous comparative period.
“The investment in BAT provides Reinet with the capacity to fund new opportunities, either from dividend income, through borrowing or through the realisation of part of the investment, and ensures that there is liquidity available at the level of Reinet Fund, including during times of market distress, and to promote long-term performance,” Rupert wrote in the annual report.
In May, Bat surprised the market when it announced that its CEO, Jack Bowles, was stepping down with immediate effect and would succeeded by CFO Tadeu Marroco. In his letter to shareholders, Rupert backed Marroco’s appointment.
“BAT delivered strong results in 2022 and continues to follow its strategic path to ‘A Better Tomorrow’. With the appointment of Mr Tadeu Marrocoas the new CEO in May 2023, BAT continues to build on its commitment to deliver long-term sustainable value for its shareholders."
Reinet was spun off from Remgro in the midst of the global financial crisis. At the time, BAT was its largest investment. However, the group has rebalanced its portfolio since 2009 and today, BAT — which used to account for about 80% of Reinet’s net asset value (NAV) — accounts for just 27%.
Pension Insurance Corporation Group Limited, a UK-based insurance company specialising in securing the liabilities of defined benefit pension schemes, now represents Reinet’s largest investment, accounting for 49% of the NAV.
The bulk of Reinet’s portfolio is unlisted and includes exposure to an array of specialist private equity funds.
The group, which records its assets and liabilities in euro, said its NAV stood at €5.7bn at the end of March.
Rupert told investors that the company had cash resources of €288m and access to the equivalent of £200m “in various currencies by way of additional borrowing facilities, to meet investment obligations and opportunities as they arise.”
“Since its inception in 2008, Reinet has invested some €3.5bn in new investments and generated an annual return of 7.7% for its investors based on the Reinet share price, with the underlying net asset value reflecting an 8.8% compounded increase since March 2009.”
The group, which loves buying its own shares, completed its fifth share buyback programme in the year under review, snapping up with 2.3 million ordinary shares between April and May last year for €45m.
Since November 2018, the group has bought more than 14-million of its shares for €222m, plus transaction costs. Rupert said the company was looking at unlocking further value for shareholders via more share buybacks.
“With a net asset value of €31.46 per share, the share buyback programmes have immediately created value for shareholders. At the AGM in August 2022, shareholders renewed their approval for Reinet to buy back its own shares; future programmes will be considered taking into account cash resources, other commitments and market conditions,” he said.
Reinet's stock is up 66% on the JSE in the past five years, valuing the company at just under R80bn.
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